Assaf Geva, an economist in the Finance Ministry, has been studying the numbers for the past 18 months, and the future doesn’t look bright, reports Haaretz (http://bit.ly/1Kz5Rlr).
According to Geva, government spending will grow by 1.2 percentage points faster than gross domestic product per year because of Israel’s aging population. At the same time, work-related tax revenues will shrink over time because Haredim and Israeli Arabs – groups who both have lower labor-force participation rates than the rest of the population – will make up a bigger share of the population.
The Central Bureau of Statistics estimates that by 2059, the non-Haredi Jewish portion of the population will have shrunk to 50.3 percent of the total, from 67.9 percent today; the Haredim share will have more than doubled to 26.6 percent, up from 11.1 percent today; and the Arab share will reach 23.1 percent, up from 20.9 percent.
Geva’s analysis shows that engaging more Haredim and Israeli Arabs in the workforce affects all Israelis.
The growing distance between government spending and government revenues, a gap of 0.8 points, equals a 9 billion-shekel shortcoming, or about $2.3 billion.
That gap is the best-case scenario for Israel, which assumes that government will raise the retirement age and bring more Haredim and Arabs into Israel’s workforce.
If more Haredim and Israeli Arabs are not integrated into the labor force, government revenues will trail spending every year by 35 billion shekels. Geva assumes Israel’s debt ratio percentage would reach 170 percent at that point – the level Israel had when its economy spiraled downward quickly in 1985.
Information taken from Haaretz